University News

Possible cuts to federal funding delayed, still pose threat

The Corporation has approved the use of reserve funds in advance of the possible sequester

Senior Staff Writer
Thursday, February 21, 2013

With the January passage of the American Taxpayer Relief Act of 2012, Congress pushed the original Jan. 1 deadline for the federal budget sequester — which includes potential cuts to higher education research and financial aid funding — to March 1. But even with the extended deadline, the higher education community has continued to express concern.

The sequester, which was originally a clause of the Federal Budget Control Act of 2011, includes a variety of automatic cuts to federal discretionary and mandatory spending programs that will go into effect if Congress cannot determine a strategy for addressing the deficit by the March 1 deadline.

“If anything, it would have been nice to have some certainty sooner,” said Beppie Huidekoper, executive vice president for finance and administration, in relation to the new deadline.

The passage of the American Taxpayer Relief Act of 2012 decreased overall budget caps for the 2013 and 2014 fiscal years, reducing cuts for discretionary-funded programs, which includes the cuts to higher education funding, from the planned 8.2 percent to 5.1 percent, according to a report by the American Council on Education.

This includes projected cuts of nearly $15 billion to the National Institutes of Health budget and $286 million in cuts to funding for the National Science Foundation.

The University normally uses past awards from federal agencies as a “leading indicator” for predicting future award money, but because of the sequester, those indicators are “way down,” Huidekoper said.

The effects of the budget sequester would not affect current research awards, she said, but in terms of future awards, “federal agencies are just holding off until they know what’s going to happen.”

The sequester will also affect federal financial aid, but Pell Grants, the University’s largest source of federal financial aid, are protected from the cuts through 2013, she said.

The sequester’s effects on financial aid will be seen more sharply at smaller schools that do not promise to meet 100 percent of demonstrated need, said Ronald Ehrenberg, director of the Cornell Higher Education Research Institute.

Federal agencies released reports last week detailing how they would cut spending, said Amy Carroll, director of government relations and community affairs.

While some agencies, including NASA and the NSF, said they will maintain or try to maintain their current award levels, others including the NIH said they would have to make cuts, she said.

For current long-term awards, researchers have started to notice a delay in the release of funds, said Clyde Briant, vice president for research. Because the sequester deadline was pushed back, agencies will continue to face uncertainty about the funding they will have to contribute to future awards, he said.

“The true situation is that no one knows what will happen,” Briant said. Because of the uncertainty about how cuts will be made, the University must be prepared for a variety of scenarios, he said, adding that the University will have a better picture of their situation after the sequester deadline has passed.

“We prepared next year’s budget with an assumed overall reduction of about 4 percent,” Huidekoper said. “We made the best decision given the information at the time.”

Huidekoper said the Office of the President and the Office of the Provost have discussed “stopgap” measures to allay faculty concern about the need for emergency funding.

The University joins the higher education community as a whole by taking the threat of the sequester very seriously, Carroll said.

The sequester has raised the question of the value of research, Carroll said, adding that divesting from research could harm the future of economy and research-based career fields.

Ehrenberg said the sequester comes at a time when federal research funding from the 2008 stimulus is drying up.

“I don’t think any university could suddenly replace a large chunk of federal funding for a long period of time,” Briant said.

The sequester was discussed during the most recent meeting of the Corporation, the University’s highest governing body.

The Corporation approved the use of reserves — a combination of unrestricted bequests and budget surpluses from the 1990s that were set aside  and have since accumulated growth, Huidekoper said.

“It’s basically our savings account (or) rainy day fund,” she said.

The reserves have helped with increases in the budget due to costs associated with recent projects, such as the operating costs of the Nelson Fitness Center and continuing financial initiatives, she said.

While the Corporation reported several new gifts at their most recent meeting, most pledges are paid over a period of time, she said.

“We are now receiving money that was pledged over five years ago, if not more,” she said. “So what we actually received this year is not going to have to do with the current budget.”

Huidekoper cited President Christina Paxson’s finalization of her financial plans for the University as a step toward improving University finances. “We will hopefully get ourselves back into balance,” she said.

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